Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January $1,2016.$ The lease terms, provisions, and related events are as follows:

$1.$ The lease term is $5$ years. The lease is noncancelable and requires annual rental receipts of $$100,000$ to be made in advance at the beginning of each year.

$2.$ The equipment costs $$313,000.$ The equipment has an estimated life of $6$ years and, at the end of the lease term, has an unguaranteed residual value of $$20,000$ accruing to the benefit of Edom.

$3.$ Davis agrees to pay all executory costs.

$4.$ The interest rate implicit in the lease is $14\%.$

$5.$ The initial direct costs are insignificant and assumed to be zero.

$6.$ The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.